Adding a share class using SH01

[Deleted member 277242]

When I originally set up one of my Limited Companies I only added 100 ordinary shares and split them 50-50 with my partner.

In hindsight we should have created B and C class shares. I don't need to draw any money down via dividends but my partner does.

I'm looking to set up 2 extra share classes:

Ordinary B shares - 100
Ordinary C shares - 100

The idea is I assign the B shares to myself and the C shares to my partner.

I can issue dividends against the C shares giving them a payment without having to give myself one.

The above would give:
Ordinary A shares - 50 - Myself & 50 my Partner
Ordinary B shares - 100 - Myself
Ordinary C shares - 100 - My Partner

Alternatively I was thinking of splitting the original 100 shares as follows:

Ordinary A shares - 25 Myself & 25 my partner
Ordinary B shares - 25 Myself
Ordinary C shares - 25 My Partner

In the second scenario I don't increase the overall number of shares. I'm thinking there might be tax implications by increasing the number of shares as in option 1 but not sure.

Anybody gone through this before. Any advise you can share.

 

[Daybooks]

Generally there should be no tax implications of a share re-organisation providing the Companies Act (Part 17 Ch8) is followed as well as its Articles.

However be aware that HMRC may challenge arrangements that divert income or merely serve to replace what would otherwise be salaries with dividends. The arrangements should also be commercial.

 

[DWS]

Why the need for A,B,C ?
Why not just have the original 100 at
A you 50
B partner 50
It’s not just a case of filling out a SH01 there are other processes to complete

 

[Deleted member 277242]

Good point. I didn’t think of that. What’s the process of changing the original 100 ordinary to 50 Ordinary A and 50 ordinary B

 

[WaveJumper]

Thinking aloud, - maybe just make sure all the shares have the same rights within your shareholders agreement.

 

[Deleted member 277242]

So current plan is as follows:

Current structure:

50 Ordinary Shares - Myself
50 Ordinary Shares - My Partner

Change to:

50 Ordinary A Shares - Myself
50 Ordinary B Shares - My Partner

This seems a lot better as it doesn't change the share capital. Just reclassify the shares. Both A and B would continue to have full rights (i.e. full rights regarding voting, payment of dividends and distributions)

Is this still an SH01? Also what other forms/process needs to be followed.

The intention is to pay different dividends to the A shares then the B shares.

 

[Ozzy]

Hi @R Alexander
The SH01 is for issuing new shares, you will be predesignating the existing shares which will be a shareholder resolution and amendment to the Articles, and as mentioned above may have a HMRC impact. I would suggest not trying to do this yourself and ask a company secretary to put it together for you, or your firm's accountant/solicitor could do it for you.

Whilst at it, and if you don't have one already, have a look at Shareholder Agreements because if you are going into business 50/50 it's strongly recommended.

 

[Deleted member 277242]

Thanks. Messaged my accountant but not sure he covers this particular area. Are there any specialists you can recommend?

 

[Ozzy]

I'm sure someone will be along shortly who can help with that service

 

[DWS]

You need a special resolution to change the share class as well as the SH08 form, also a special resolution to amend the articles and also to amend them.
If your accountant does not deal with things like this, which is fair enough plenty don’t, then they should be able to point you towards a firm that does.

 

[1st Formations]

Hi @R Alexander

To allow for new share classes in a company, the first step is usually to adopt new Articles of Association which will detail the rights of each class of shares. As part of this conversion, form SH08 should be filed with Companies House to redesignate any shares as required as well as form SH10 which confirms the particulars of each class of shares.

At 1st Formations, we offer this as a service which provides you with all the necessary documentation to remain compliant. Our service includes drafting bespoke articles of association, board minutes, members resolution, written resolution procedure and write of up forms SH08 and SH10.

 

[Deleted member 277242]

Hi @R Alexander

To allow for new share classes in a company, the first step is usually to adopt new Articles of Association which will detail the rights of each class of shares. As part of this conversion, form SH08 should be filed with Companies House to redesignate any shares as required as well as form SH10 which confirms the particulars of each class of shares.

At 1st Formations, we offer this as a service which provides you with all the necessary documentation to remain compliant. Our service includes drafting bespoke articles of association, board minutes, members resolution, written resolution procedure and write of up forms SH08 and SH10.

Thanks. What’s the fee for doing this?

 

[1st Formations]

From the information you have provided, the fee for this service would be £199.99 plus VAT.

 

[Deleted member 277242]

Thanks. Much appreciated